Legal Definitions - GRM

Term: GRM
Definition: GRM stands for Gross Rent Multiplier. It is a ratio used to determine the value of an income-producing property by dividing the property's sale price by its gross rental income. The GRM is a quick way to estimate the potential return on investment for a property. Example: If a property is listed for $500,000 and generates $50,000 in gross rental income per year, the GRM would be 10. This means that it would take 10 years of rental income to recoup the purchase price of the property. Explanation: The GRM is a useful tool for real estate investors to quickly evaluate the potential profitability of a property. A lower GRM indicates a better investment opportunity, as it would take fewer years to recoup the purchase price. However, it is important to consider other factors such as expenses, vacancy rates, and potential for rental increases when making investment decisions.